The solution of the two-dimensional Euler equations is based on the two-dimensional linear convection equation and the Euler-equation decomposition developed by Hirsch et al. The scheme is genuinely two-dimensional. At each iteration, the data are locally decomposed into four variables, allowing convection in appropriate directions. This is done via a cell-vertex scheme with a downwind-weighted distribution step. The scheme is conservative, and third-order accurate in space. The derivation and stability analysis of the scheme for the convection equation, and the derivation of the extension to the Euler equations are given. Preconditioning techniques based on local values of the convection speeds are discussed. The scheme for the Euler equations is applied to two channel-flow problems. It is shown to converge rapidly to a solution that agrees well with that of a third-order upwind solver.